Market Update 1/12/26

By Will Hubbard

Market snapshot

•  Stocks: U.S. equities had a strong first full week of 2026, with gains across major indexes and leadership from small-cap stocks. The S&P 500 rose 1.58%, the NASDAQ Composite gained 1.88%, the Dow Jones Industrial Average advanced 2.34%, and the Russell 2000 climbed 4.68%.

•  Bonds: Interest rates remained steady as markets considered expectations for potential rate cuts in 2026 against somewhat sticky inflation. The benchmark 10-year Treasury yield fell to near 4.17% from 4.19%.

•  Gold and commodities: Gold prices jumped 4.09% to close the week around $4,509.50 per ounce as geopolitical tensions and safe-haven demand supported the rally in the precious metal.

•  Market indicators and outlook: Our strategies were broadly bullish last week, with some leveraged strategies using all or most of their available leverage. Market regime indicators continue to show a Normal economic environment, which has historically been positive for stocks, bonds, and gold—but with a substantial risk of a downturn for gold. Normal is one of the best stages for stocks, with limited downside. Volatility remains Low and Falling, a backdrop that has tended to favor stocks over gold and then bonds.

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For the latest information on our Quantified Funds, check out our weekly fund updates. You can also see the daily holdings of the funds here.

Stocks

U.S. equities posted gains of more than 1% across major indexes last week, prompting a look at how similar starts to the year have historically played out. According to Bespoke Investment Group, since 1953, when the S&P 500 has finished the first week of the year in positive territory, the average return for the remainder of the year is 13.6%. When the Index has gained more than 1% during the first week, the average return has increased to 14.1%. While history is no guarantee, early-year market strength has often provided a constructive backdrop for the months that follow.

Generally positive economic data supported the market’s advance:

•  Institute for Supply Management (ISM) Purchasing Managers’ Indexes: Manufacturing activity remains in contraction, while the services sector continues to expand.

•  Employment: Nonfarm payrolls rose by 41,000, below expectations of 49,000 but still indicating job growth. The unemployment rate fell to 4.4% from 4.6%, compared with expectations of 4.5%.

•  Wages: Average hourly earnings increased 0.3% month over month, in line with forecasts.

•  Consumer sentiment: The University of Michigan’s preliminary consumer sentiment index came in better than expected. The latest reading was the highest since September 2025 and above last year’s lows following the tariff-related market volatility in April.

The most notable headline risk last week involved the Federal Reserve. News broke that the Department of Justice issued a subpoena related to Federal Reserve Chair Jerome Powell’s prior congressional testimony regarding renovation costs for Federal Reserve buildings in Washington, D.C. In a statement posted on the Federal Reserve’s website, Powell disputed the claims, described the action as politically motivated, and emphasized the central bank’s independence in setting monetary policy.

Equity futures were briefly spooked Sunday evening by the news. The full impact of it may take time to unfold and will likely be assessed in the days and weeks ahead.

The key takeaway remains consistent with recent updates: be prudent. Allowing data—not emotion—to guide decision-making remains especially important in an environment where economic data remains mainly positive, though with some political noise thrown into the mix. Scenario analysis and stress testing can help investors better understand how different outcomes may affect their portfolios.

Bonds

Bond markets were calm, with Treasury yields little changed on the week. The 10-year yield fell 2 basis points to 4.17%, staying within the trading range that has largely held since September.

Rates across the curve remained mostly range-bound. Economic data continued to come in mostly positive, but the future of inflation remains somewhat uncertain. Movements in interest rates have been more pronounced at the short end of the yield curve—two years and under—while longer-term yields have shown less volatility. The limited movement in longer-term rates likely reflects continued concerns about inflation remaining higher than desired.

The broader backdrop still includes elevated equity valuations and the potential for increased market volatility, particularly if economic data begins to disappoint. With longer-term interest rates remaining relatively high amid sticky inflation expectations, investors may want to think about their longer-term inflation outlook and whether fixed-income exposure could help offset equity-related risks.

Gold and commodities

Gold prices rose sharply to start the year, adding 4.09% and closing the week at $4,509.50 per ounce. Some of this rally could be attributed to geopolitical tensions, including continued unrest in Iran and recent developments between the U.S. and Venezuela. A weaker U.S. dollar and the prospect of future monetary easing may also be supporting gold’s appeal as a safe-haven investment.

Flexible Plan Investments (FPI) is the subadviser to the only U.S. gold mutual fund, The Gold Bullion Strategy Fund (QGLDX). Launched in 2013, the fund is designed to track the daily price changes in the precious metal in a more tax-efficient manner than its ETF counterpart, GLD.

The indicators

Our QFC S&P Pattern Recognition strategy started the week 190% long, scaled back to 180% long on Tuesday, and remained there for the rest of the week. Our QFC Political Seasonality Index began the week in its risk-on posture and remained there until Thursday’s close, when it moved to risk-off. (The QFC Political Seasonality Index—with all of the daily signals—is available post-login in our Weekly Performance Report section under the Domestic Tactical Equity category.)

Our intermediate-term tactical strategies have been varied in their degree of defensive positioning. The key advantage these strategies offer investors is their ability to adapt to changing market environments—participating during uptrends and moving to a more defensive posture during downtrends.

The Volatility Adjusted NASDAQ strategy started the week 140% long, increased exposure to 200% long on Monday’s close, and remained there for the rest of the week. The Systematic Advantage strategy began the week 60% long, increased to 90% on Tuesday’s close, and reduced exposure back to 60% long on Friday’s close. Our QFC Self-adjusting Trend Following maintained a 200% long position throughout the week. These strategies can employ leverage, so their exposure may exceed 100% at times.

Our Classic model was fully risk-on all week. Most Classic accounts follow a signal that can change exposure within a week, though a few remain on platforms requiring up to a month to adjust to new signals.

FPI’s Growth and Inflation measure—one of our Market Regime Indicators—shows that we are in a Normal economic environment, defined by positive monthly changes in both prices and GDP. A Normal environment has occurred 75% of the time since 2003 and has been positive for stocks, bonds, and gold. Stocks have delivered the highest rate of return in Normal periods, while gold has ranked second but has also experienced high drawdowns.

Our S&P volatility regime is registering a Low and Falling reading, which favors stocks over gold and then bonds from an annualized return standpoint. The combination has occurred 32% of the time since 2003 and has been associated with higher drawdowns for gold.